Question

Pato Company produces leather sandals. The company employs a
standard costing system and has the following standards for
direct materials in order to produce one pair of sandals:

                    standard quantity    standard price
direct materials       26 pounds        $19 per pound

During May, Pato purchased 33,900 pounds of direct materials
and produced 9,000 pairs of sandals, using 31,000 pounds of
direct materials to do so.

Pato Company reported the following variances for May:

Direct material price variance ........  $23,730 favorable
Direct material quantity variance .....  $ 5,400 unfavorable

Calculate the actual price paid per pound of direct material
purchased by Pato Company in May.

Answer 1

Direct Material price Variance = (SP - AP ) * AQ => AQxSP - AQⓇAP Standard price =$19 Actual price (AP) =Actual Cost/ Actual Units Purchased Actual Quantity is 33100 Pounds Direct Material price Variance is $23,730 $23,730=($19 -(Actual cost)x33100 $23,730 =$19 *33100 – (Actual Cost)x33100 Actual Cost =$628900 - $23,730 (Actual Cost)x33100= $605170 Actual Cost =$605170/33100=>$18.2830 Actual Cost =$18.2830

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